Consider yourself lucky (and a rare breed) if you don’t have any debt. Almost everyone owes money to someone -a mortgage company, a car lender, or various banks that issue credit cards. So how does seemingly manageable debt become overwhelming debt? Usually it doesn’t happen overnight. It may be a series of events which gradually takes its toll on your financial health. A major purchase here, a medical emergency there – and all of a sudden you’re on a slippery slope to big money problems.
If any of the following statements describes your current financial situation, it might be time to take action before things get hopelessly out of control. Ignoring financial problems never solves anything. In fact, the exact opposite is true- it almost always makes things worse. Review our 12 questions below to see if you are carrying too much debt.
- You have no idea how much money you actually owe.
- More than 40% of your monthly incomes goes towards debt re-payment (not including your rent or mortgage).
- Your credit card accounts are either at or over their limits.
- You only pay the minimum amount due each month on revolving charge accounts.
- You routinely take cash advances (which come with an even higher APR) to pay other bills.
- You charge everyday purchases such as gas or groceries. Note: This is perfectly okay to do if you’re using a rewards credit card and pay off your balance in full each month.
- You never balance your bank account(s) and often bounce checks or overdraw your account.
- You hide purchases from your partner or spouse.
- You have very little or no savings. (Six months worth of income at a minimum)
- You have no emergency fund. (For true emergencies, not shopping)
- Creditors are contacting you either by phone or mail.
- You constantly think and worry about money. So much so that your health, relationships, and work are starting to be affected.
Many people find themselves in over their heads when it comes to debt. Unfortunately, it’s hard to make smart financial decisions if you aren’t aware of your own situation- what amount of money comes in each month and what goes out.
These three suggestions can help you get started.
- Make a budget. Keep it simple.
- Control your spending. Buy what you need not what you want.
- Start saving. Begin with small amounts, if necessary. But start.